Mortgage affordability – the proportion of disposable earnings devoted to mortgage payments – has remained unchanged in the past year despite house prices rising, new research has found.
According to Halifax, the typical first-time borrower would have to spend 30% of their earnings on their mortgage payments – comfortably below the long-term average of 35%.
This figure remains unchanged from 2015 despite house prices going up by 7% in the past year.
Halifax said this was mainly due to the record low mortgage rates on offer last year, which fell from an average of 2.49% in the first quarter to 2.17% by the fourth.
Halifax used Bank of England mortgage rate data and Office for National Statistics average earnings figures to calculate the mortgage affordability data. It assumes that the average borrower is a first-time buyer or homemover with a 30% deposit.
North-South divide
The most affordable local areas are in northern Britain, whilst the least affordable areas are all in the South.
West Dunbartonshire, North Lanarkshire and East Ayrshire among the most affordable local authority districts in the UK. There, typical mortgage payments account for 16% of average local earnings in all areas.
Other affordable areas include Copeland in Lancashire (16%), Merthyr Tydfil (17%) and Blaenau Gwent (17%), both in Wales.
Unsurprisingly, the least affordable areas are predominantly in London. Haringey is the least affordable local authority district in the country, with average mortgage payments on a new loan accounting for 68% of average local disposable earnings, followed by Brent (66%), Mole Valley (65%) and Camden (65%).
Martin Ellis, housing economist at Halifax, said: “Looking back almost a decade, there has been a considerable improvement in housing affordability across the country, which has been maintained over the past year as further falls in mortgage rates have offset the effects of higher house prices.
“The significant reduction in mortgage payments by a typical borrower has resulted mostly from record low rates that have provided monthly savings of, on average, around £220 in 2016 compared to a peak monthly payment of £888 in 2007.”
Mortgage payments as percentage of disposable income
| Region | Repayments as percentage of earnings | Long-term average |
| North East | 22.8% | 29.1% |
| Yorkshire and Humber | 22.8% | 28.3% |
| North West | 23.9% | 29.3% |
| East Midlands | 23.2% | 32.7% |
| West Midlands, | 28.4% | 35.9% |
| East Anglia | 28.1% | 35.1% |
| South West | 34.3% | 41.6% |
| South East | 41.3% | 46.8% |
| London | 48.6% | 43.5% |
| Wales | 22.3% | 31.7% |
| Scotland | 19.8% | 28.5% |
| Northern Ireland | 20.2% | 28.5% |
| UK | 29.7% | 35.4% |
